2011 U.S. ONLINE RETAIL HOLIDAY - Kenshoo€¦ · thanksgiving black friday cyber monday green monday christmas new year’s eve new year’s $-‐ $2.00

S H O P P I N G

R E P O R Tfull edition

2011 U.S. ONLINE RETAIL HOLIDAY

Release Date: January 10th, 2011Covering Search Advertising Trends in the United States

November 1, 2011 through January 2, 2012

2© Kenshoo, Inc. 2011

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Contents

Infographic Overview

Key Insights

1. U.S. Consumers are Using the Internet More Often for Holiday Purchases and They’re Spending More

2. Heavy Retail Competition Drives Costs up but Return on Ad Spend Still Strong

3. Thanksgiving Cements its Position as a Major Online Shopping Day

4. U.S. Retailers Saw Fewer Opportunities for Ad Exposure but Higher Response When Exposure Occurred

5. U.S. Consumers are More Trusting of Search Ads and Retailers are More Savvy with Paid Search Campaign Management

6. Last-minute Shoppers Still Purchase Online the Week Before Christmas

7. Deal-Seeking and Gift-Card Redemption Drive Higher Post-Christmas Revenue

Trends in Mobile and Tablet Usage

Predictions for 2012

Summary Calendar

Glossary

Methodology

About Kenshoo

Contact

CONTENTS


2011 U.S. Online Retail Holiday Shopping Report

7 KEY INSIGHTS

Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.Note: Insights reflect year-over-year data from Kenshoo U.S. Retail Index from November 1st, 2011 through January 2nd, 2012 vs. the same period one year prior.


2011 Online Retail Holiday Shopping Report



2011 Online Retail Holiday Shopping Report



KEY INSIGHTS

1. U.S. Consumers are Using the Internet More Often for Holiday Purchases and They’re Spending More //////////////////////////////////

U.S. consumers have clearly come to rely on the Internet, and search engines in particular, as a preferred mode of commerce.

Throughout the holiday season, consumers spent more money online during the holiday season than last year as total sales

revenues for retailers driven by search advertising rose 22%. See Figure 1.0.

FIGURE 1.0 | U.S. Holiday Season Revenue Driven by Search Advertising Up 22%

Source: Kenshoo 2011 U.S. Online Retail Holiday Shopping Report | © Kenshoo, Inc.

2010 Revenue

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U.S. Holiday Season Revenue Driven by Search Adver8sing Up 22%

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For the entire holiday season, AOV was 5% higher than last year. This was likely a result of better merchandising by retailers

with more effective product bundling and promotions. See Figure 1.2.

FIGURE 1.2 | Average Order Value for U.S. Sales Driven by Search Ads During the Holiday Season Up 5%



U.S. Consumers are also spending more during each session at retail websites. Average order value (AOV = Revenue/Conversions)

for the entire period was up 5% Year-over-Year (YoY). Consumers really loaded up their carts earlier in the season as they

shopped en masse for all the items on their lists. During November, the AOV ranged from $125 to $160 per day. However,

AOV fell between $110 and $135 in December as consumers became more targeted in their shopping, buying only the items

they needed or had forgotten. See Figure 1.1.

FIGURE 1.1 | U.S. Basket Size by Day - Average Order Value for 2011 Holiday Season

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U.S. Holiday Season Paid Search YoY Budget Increase by Day

YoY Budget Increase

2. Heavy Retail Competition Drives Costs Up but Return on Ad Spend Still Strong. ////////////////////////////////////////////////////////////////////////////////////

Search advertisers brought out the big guns this holiday season to capture incremental volume. Search ad budgets for

the holiday season were significantly higher YoY as retail advertisers increased their overall investment by more than

30%. See Figure 2.0.

FIGURE 2.0 | U.S. Holiday Season Search Advertising Budgets Up 31%

Retailers got an early jump on search advertising activity in 2011. The week of Thanksgiving was especially competitive with

budgets for Thanksgiving Day and Black Friday topping out at 49% higher than 2010. Retailers also invested significantly more

this year in luring last-minute shoppers and deal-seekers as seen by the spikes in spend reaching upwards of 60% just before

and just after Christmas. See Figure 2.1.

FIGURE 2.1 | U.S. Year-over-Year Search Advertising Budget Increase by Day

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U.S. Holiday Season Paid Search YoY Average CPC Change

YoY Average CPC Change

Higher budgets led to increased competition on individual keyword bid auctions as the average Cost Per Click (CPC) for

the holiday season increased by 8%. Competition spiked the day before Thanksgiving with an average CPC jump of 24%

compared to the same day last year. We also see that retailers pushed last-minute promotions as CPC jumped right before

Christmas. Additionally, the sustained budget increases through New Year’s Weekend is reflected in higher CPC for those

dates. See Figure 2.2.

FIGURE 2.2 | U.S. Holiday Season Paid Search Average Cost Per Click Up 8%

The overall increase in competition led to a slight drop in YoY Return on Ad Spend (ROAS = Revenue/Spend) as rising

budgets outpaced the rise in revenue. However, the return was still very strong as paid search advertising proved to be a

profitable channel. For the period, total ROAS was $5.57, meaning that for every $1 spent by retailers on search advertising,

they generated $5.57 in online sales revenue. See Figure 2.3.

FIGURE 2.3 | U.S. Holiday Season Search Advertising Return on Ad Spend: $5.57 During the Holiday Season



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Holiday Season Search Adver2sing Return on Ad Spend: $5.57 During the Holiday Season

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3. Thanksgiving Cements its Position as a Major Online Shopping Day /////////////////////////////////////////////////////////////////////////////////////////////////////////////

In the Kenshoo 2010 Online Retail Holiday Shopping Report, we dubbed Thanksgiving “Cyber-Kickoff Day” in light of

the dramatic YoY increases we saw in revenue and the number of transactions on Turkey Day. This year, the trends

accelerated with a 28% increase in YoY conversion rates on Thanksgiving Day. See Figure 3.0. It seems people are hardly

waiting for the turkey to come out of the oven before going online to do their shopping; and when they’re going online,

they’re ready to buy. Many retailers started their Black Friday promotions on Thanksgiving and this was a powerful

incentive to convert browsers to buyers.

Higher conversion rates drove a 40% increase in YoY revenue from search advertising on Thanksgiving, exceeding the 29%

YoY growth for Black Friday. See Figure 3.1.

FIGURE 3.0 | U.S. Thanksgiving Day Search Advertising Conversion Rates Up 28%

FIGURE 3.1 | U.S. Paid Search Advertising Revenue Increase YoY



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http://www.kenshoo.com/Kenshoo_2010_Online_Retail_Holiday_Report.pdf



4. U.S. Retailers Saw Fewer Opportunities for Ad Exposure but Higher Response When Exposure Occurred ///////////////////////////////

For the 2011 holiday season, search advertising impressions were down 3% YoY but clicks were up 21%. See Figures 4.0

and 4.1.

There are a few possible explanations for the drop in impressions:

• U.S. consumers performed fewer search queries relative to last year and instead turned to social networks

(including real-world conversations with friends and family at the dinner table) for input on what to buy.

• Modifications made by search engines to improve relevancy of Search Engine Results Pages (SERPs) caused fewer ads to show.

As for the increase in clicks, there are two likely explanations:

• U.S. consumers have come to rely on search ads as the place to find the best and most up-to-date deals.

• Advertisers did a better job of delivering targeted ads and compelling offers.

FIGURE 4.0 | U.S. Holiday Season Search Ad Impressions Down 3%

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U.S. Holiday Season Search Ad Impressions Down 3%

2010 Impressions

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FIGURE 4.1 | U.S. Paid Search Holiday Season Clicks Up 21%


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U.S. Paid Search Holiday Season Clicks Up 21%

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FIGURE 4.2 | U.S. Holiday Season Key Dates - YoY Change Impressions and Clicks


Looking at key dates during the holiday season, we see an even bigger discrepancy between impressions and clicks

YoY. See Figure 4.2. On Black Friday, Cyber Monday, Green Monday, and Christmas Day, there was a pronounced inverse

relationship between impressions and clicks.


5. U.S. Consumers are More Trusting of Search Ads and Retailers are More Savvy with Paid Search Campaign Management /////////////////////////////////////////////////////////////////////////////////////////////////////////////

Paid search advertising click-through rates for the holiday season in 2011 rose 26% over 2010. See Figure 5.0. Search has

become the go-to channel for consumers when they’re ready to make a purchase. Meanwhile, retail advertisers continue to

improve their campaign structures by leveraging technology platforms to automatically create keywords, ads, and landing

pages based on updated product inventory and promotions. This approach ensures relevancy and improves quality score,

having the net effect of delivering targeted ads to the most qualified consumer queries.

FIGURE 5.0 | U.S. Paid Search Holiday Season Click-Through Rates up 26%


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U.S. Paid Search Holiday Season Click-‐though-‐Rates Up 26%

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6. Last-minute Shoppers Still Purchase Online the Week before Christmas ///////////////////////////////////////////////////////////////////////////////////////////////////

This year, consumers turned to the Web for last-minute shopping at a much higher rate than 2010. Placing their trust in rush

shipping, consumers drove search advertising revenue up 40% during the week before Christmas, peaking at 60% the day

before Christmas Eve. See Figure 6.0.

FIGURE 6.0 | U.S. Week Before Christmas - YoY Revenue Increase 40% (Total Week)


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17-‐Dec 18-‐Dec 19-‐Dec 20-‐Dec 21-‐Dec 22-‐Dec 23-‐Dec

U.S. Week Before Christmast -‐ YoY Revenue Increase 40%

YoY Revenue Increase


7. Deal-Seeking and Gift-Card Redemptions Drive Higher Post-Christmas Revenue //////////////////////////////////////////////////////////////////////////////////

Thanks to consumers looking for bargains as well was making use of gift cards, search ad impressions were up nearly 20%

YoY following Christmas. See Figure 7.0.

FIGURE 7.0 | U.S. Post-Christmas Search Ad Impressions Up 19%

FIGURE 7.1 | U.S. Post-Christmas Conversions Up by 37% and Revenues Up by 32% YoY



These deal-seekers were not just window shopping, though, as sales conversions were up 37% and revenue increased 32%

for the 8 days following Christmas. See Figure 7.1

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U.S. Post-‐Christmas Search Ad Impressions Up 19%

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NEW YEAR’S EVE

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FIGURE 7.2 | U.S. Searches for “Shopping Deals” Keyword on Google December 11, 2011 through January 8, 2012

FIGURE 7.3 | U.S. Searches for “Redeem Gift Cards” Keyword on Google December 11, 2011 through January 8, 2012

Source: Google Insights for Search, 2012

Source: Google Insights for Search, 2012

Post-Christmas searches for “Shopping Deals” and “Redeem Gift Cards” reached their peaks on December 26th as seen in

Google Insights for Search. See figures 7.2 and 7.3.


TRENDS IN MOBILE AND TABLET USAGE2011 saw a remarkable diversification of device usage as smartphones and tablets increased in popularity and consumers

turned to them more often to search and actually make purchases. In Figure 8.0 we can see metrics that indicate how

consumers are using various devices to shop online.

Personal computers still hold the lion’s share of both clicks and revenue. This is clearly the device that consumers are most

comfortable transacting upon. Personal computer conversion rates are higher than tablet and mobile which can be attributed to the

fact that most retailers have spent more time and have more experience optimizing the shopping experience for these devices.

Interestingly, tablets are responsible for the highest average order value (revenue per conversion) this year. As the market

share of tablets grows, retailers will have to make plans to accommodate them, including creating rich mobile sites as well

as considering creating applications with stripped-down functionality.

Mobile phone revenue accounted for only 1% of the total revenue and performed the poorest when measured by conversion

rate. Consumers tend to use their cell phones for quick searches, locating products or stores, and placing phone call inquiries

as opposed to completing actual transactions.


FIGURE 8.0 | Breakdown by Device of U.S. Online Retail Clicks and Purchases Resulting from Search


For those consumers who did use smartphones to make purchases, Apple iOS mobile phone users represented a more

desirable audience, spending 13% more on purchases and delivering a conversion rate that was almost 20% better than

Android mobile phone users. See Figure 8.1.


FIGURE 8.1 | Conversion Rates and Average Order Size by Mobile Phone Operating System

Conversion Rate

0.79%

Conversion Rate

1.01%

Average Order Size $108.33

Average Order Size $122.48

Android Mobile Phone Apple Mobile Phone


PREDICTIONS FOR 20121. Shoppers will spend more online in 2012 spurred on by the “Deal Economy.”

While this is certainly not the boldest prediction, the Kenshoo U.S. Online Retail Holiday Shopping Report revealed record revenue

figures in 2011. Other research from comScore and IBM also showed significant increases in e-commerce activity. Black Friday has become an online shopping event in addition to a staple for brick and mortar stores. In many cases, online retailers

started their Black Friday deals online during Thanksgiving Day to capture increased demand. This is just one example of how the

“deal-economy” has affected the retail landscape. Thanks to companies like Groupon, LivingSocial, and Rebate Networks, consumers

have been conditioned to seek out deals and never pay “full price.” Meanwhile, retailers have become savvy with merchandising tactics

to position their offerings as true deals.

A final trend leading to increased online shopping is the impulse purchases brought on by shipping clubs such as Amazon Prime and/or

free-shipping offers from various merchants. Shipping costs (and lag times) were once a barrier to online sales but no longer. In 2012,

look for retailers to leverage advanced technology solutions like Kenshoo RealTime Campaigns to manage deals and promotional

offers in “real-time” based on inventory availability and up-to-the-minute pricing and packaging.

2. 2012 will be the year of the tablet.

With nearly 7% of all revenue driven by paid search advertising coming from tablets, we can expect this device to play a more

prominent role in consumer shopping and marketer ad targeting habits.

According to the Pew Research Center, 11% of Americans own a tablet and spend an average of 95 minutes a day on the device. Families

with household incomes over $75,000 make up 54% of tablet owners, which may help explain why the average order size on tablet

purchases was higher than desktop.

As for mobile phones, while conversion rates and revenue share are relatively low, keep in mind the data we looked at represents the

Kenshoo U.S. Retail Index where a conversion is defined as an online purchase. For other verticals where conversions are defined as

application installs, phone calls, or location check-ins, mobile phone conversion metrics will be quite strong. Marketers will be wise to

leverage tools like Kenshoo that integrate online and offline metrics into the tracking, reporting, attribution, and optimization processes.

Another best practice for search marketers is to use platforms like Kenshoo to break out separate campaigns for mobile versus desktop as

well as target specific devices. Tailoring keyword selection, ad copy, landing pages, and bids to each particular device will improve quality

score metrics as well as conversions.

3. Paid search will increasingly be viewed as cost of goods sold in light of massive volume but heavy competition.

In its IPO filing, Groupon asked investors to view online marketing expenses as a capital expense. While this ran contrary to standard

accounting principles and caused much debate, the message was clear -- online marketing, and particularly paid search, is a long-term

investment and, in many cases, a pre-requisite for sales and, therefore, could be considered a cost of goods sold.

http://www.forbes.com/sites/ericsavitz/2011/06/02/deja-vu-groupons-bubble-1-0-approach-to-accounting/

http://features.journalism.org/2011/10/25/tablet-revolution/

http://www.comscore.com/Press_Events/Press_Releases/2012/1/U.S._Online_Holiday_Shopping_Season_Reaches_Record_37.2_Billion_for_November-December_Period

http://www.coremetrics.com/solutions/benchmark-report-black-friday-cyber-monday-2011.php

http://www.kenshoo.com/2011HolidayReport.asp

http://www.sec.gov/Archives/edgar/data/1490281/000104746911005613/a2203913zs-1.htm


Even if SEM can’t be taken as capital expenditures, such an approach to budgeting and P&L management becomes especially important

as the paid search competition becomes cut-throat and many advertisers irrationally increase bids beyond the point of profitability in an

effort to maintain volume. In order to meet sales projections in a marketplace marked by inflated budgets and CPC but flat impressions

and ROAS, expectations need to be set very carefully and budgets doled out responsibly.

To effectively compete in such a landscape, we expect retailers to maximize paid search budgets first, before allocating money to any

other marketing line items. Furthermore, marketers will continue to adopt model-based bid policies, such as those offered by Kenshoo, to

dynamically categorize keywords into portfolios and automatically calculate marginal ROI before making optimizations and squeeze out

last bit of profit.

4. SEO and PPC will be managed more holistically as competition increases and multiple device usage proliferates.

In many cases dwarfing paid search volume, organic search remains the largest driver of Web traffic to retailers. With the PPC landscape

continuing to get more competitive and ROAS holding steady, optimizing websites to achieve stronger organic rankings will be on every

marketer’s 2012 to-do list.

Retailers will need to develop mobile-friendly sites and other assets that will stand out on SERPs as search engines continue to move

towards universal rankings and blended listings. The key to success for marketers will be to view PPC and SEO data side-by-side to best

understand the interplay between paid and organic listings as it relates to the path-to-conversion. In some cases, 1+1 will equal 3 and a

listing in paid and organic will generate more volume and/or conversions. But, for some keywords, a cannibalization effect will occur and

1+1 will equal 1.5.

In 2012, retailers will take advantage of partnerships like the one struck by Covario and Kenshoo to integrate SEO and PPC data into

a single dashboard for ease of tracking, analysis, and optimization. Additionally, organic keyword traffic can be a great source of

inspiration for paid search keyword expansion. Tools like Kenshoo that integrate SEO data can activate such insights within the

same user interface.

5. Marketers will integrate their social media and SEM campaign management practices.

For the second straight year, SEM ad impressions were flat or down during the holiday season, reflecting a tendency for consumers

to query their friends and families via social networks before, after, or even instead of querying their favorite search engine.

Social networks such as Facebook, Twitter, and LinkedIn have become a trusted source for product recommendations. Since the

advertising opportunities on social networks resembles that of paid search with dynamic ads and real-time bidding, search marketers

are positioned well to leverage platforms like Kenshoo to manage search and social campaigns.

However, the mindset of consumers on social networks is quite different than when they are using search engines with

communication and entertainment more top of mind than commerce. Furthermore, the ad targeting options for retailers on

social networks are much different with intent inferred by user profiles, interests, location and connections.

To best address both the similarities and nuances between social network advertising and search engine marketing, retailers will seek

out technology solutions like Kenshoo that provide unified tracking, reporting, and attribution while delivering unique user-interfaces,

targeting options, and bid algorithms to extract the maximum value from each channel.

http://www.emarketer.com/%28S%28exv0iwfrn3jbtc45oprrgh55%29%29/Article.aspx?R=1008241


SUMMARY


GLOSSARY

Click Through Rate:

Return on Ad Spend:

Average Order Value:

Conversion Rate:

Cost Per Click:CTR =

ROAS =

AOV =

CVR =

CPC = Clicks

Impressions

Revenue

Cost

Revenue

Conversions

Conversions

Clicks

Cost

Clicks

.


METHODOLOGYThe research provided in this report is based on the Kenshoo U.S. Retail Index™, a cross-section of Kenshoo retail advertisers

covering verticals like apparel, electronics, entertainment, home improvement, gifts, luxury goods, and toys. The data set

includes paid search advertising in the U.S. across channels like Google, Yahoo, and Bing from November 1st through January

2nd in 2011 and compared to that same period in 2010. The 2011 statistics were culled from an aggregation of more than 28

billion total search advertising impressions, 350 million clicks and 8 million online sales transactions. The mobile and tablet

data represents a subset of retailers in the index and a shorter window of analysis during the month of December 2011.

ABOUT KENSHOOKenshoo is a digital marketing software company that engineers technology solutions for search marketing, social media

and online advertising. Advertisers, agencies and marketing providers use Kenshoo Enterprise, Kenshoo Local and Kenshoo

Social to direct more than $15 billion in annual customer sales revenue. The Kenshoo Universal Platform delivers automation,

intelligence, integration and scale to make better marketing investments. Kenshoo powers 6 of the top 10 global hotel

groups, 7 of the top 10 retailers, 7 of the top 10 telecoms, 9 of the top 10 ad agency networks, and 23 of the Fortune 50

companies. With campaigns running in more than 100 countries, Kenshoo customers include Accor, Annalect, Barnes

& Noble, CareerBuilder, Facebook, Havas Digital, Hitwise, iREP, John Lewis, LendingTree, Sears, Starcom MediaVest Group,

Tesco, Travelocity, Walgreens, and Zappos. Kenshoo has ten international offices and is backed by Sequoia Capital and Arts

Alliance. Please visit www.Kenshoo.com for more information.

Kenshoo is a trademark of Kenshoo Ltd. Other company and brand names may be trademarks of their respective owners.

CONTACTPlease contact Ari Rosenstein, Director of Marketing Research at Kenshoo, with any questions about this research or the

insights derived.

[email protected]

http://www.kenshoo.com/

Documents

2011 U.S. ONLINE RETAIL HOLIDAY - Kenshoo€¦ · thanksgiving black friday cyber monday green monday christmas new year’s eve new year’s $-‐ $2.00